Inside The Budget Of A Young New York City Family

When Johnny and Joanna got married and started budgeting, they didn't exactly go around advertising it.

"We were super coy about it," says Johnny, 30, a copywriter who lives with his wife and two little girls in New York City. "We made up in our minds that we were branded with this scarlet letter," he says, remembering thinking a budget would be the end of their social life and mean association with a stigma that conjures up images of excessive couponing and crazy TLC shows.

When the couple began sharing the ins and outs of their budget with the world at large through OurFreakingBudget.com, it took them a year to tell friends and family.

When they finally came out with it, the reaction they got from people was that it was really weird but also really cool, recalls Johnny. The couple realized it helped keep them accountable -- and their friends realized Johnny and Joanna hadn't been ducking out of dinners because something was wrong with their friendship, but because they couldn't afford it.

The reason for making a budget started where so many do: They had a lot of debt and wanted it gone.

After graduating from Brigham Young University, the couple owed about $20,000, most of which was student loan debt. They wanted to pay it off in two years if they could.

It wasn't but several months later when Johnny got a job offer from a storied Madison Avenue advertising agency he couldn't pass it up and the couple made the decision to move from Utah to New York City, the most expensive town in the nation.

The gig came with a salary increase, but it paled in comparison to how much their cost of living was going to go up. This made the whole budgeting thing that much more important.

At the beginning of every year they sit down for a couple hours with a bunch of candy and hash out their plan for the year. What do they have going on? Are they going to travel and how much do they need? What gift-giving occasions are there going to be and how much are they going to spend on each person?

At first, it was somewhat of a guessing game. For instance, the couple low-balled their food budget the first month and ended up eating ramen and peanut butter & jelly sandwiches for a week, so stubborn they were about sticking to their budget. The next month they increased the amount they could spend on food. They also realized they were "more boring" than they thought and didn't need such a large entertainment budget, so they cut from that.

While the heavy lifting is done every January, they still sit down at the beginning of each month to see how they're doing and look to the month ahead.

Expenses are tracked in real-time through a free app called HomeBudget. It automatically syncs between phones, so if Joanna is at the deli buying a sandwich and Johnny is buying a subway card, they'll both be looking at the same updated picture. It's set up in such a way that they have to manually enter expenses -- this is on purpose, since it means they are consciously thinking about each expense as they go about their days.

"We're very much masochists," explains Johnny. "We believe in pain and feeling the pain to prevent us from spending money in the future."

Unique New York tweaks were in order, too, to keep expenses down. The couple, who live in Manhattan's Upper West Side neighborhood, have shared an unlimited monthly pass for the subway, for instance. They also frequent museums on the free admission days, meet up with friends for dessert instead of puttingdown hefty sums at fancy NYC restaurants and schlep to a Costco across town on a city bus.

Johnny and Joanna with daughter Sally

Of course, certain liberties are granted. While they have a joint banking account and share their finances, each has their own personal spending money that can be spent without judgement. They've also backed off on how closely they track expenses (Translation: No more getting mad about forgetting to log a $2 pack of gum.)

Utilities, $345: This includes electricity, gas and heating, cell phone and internet. It doesn't fluctuate much; the electric bill goes up in the summer and the heating bill goes up during the winter.

They do call their cell and internet provider every several months to ask for a better deal. The trick is to ask to speak with the retention department, explain you're trying to stay on a budget and inquire if there's any way to save on your plan. It usually takes 15-30 minutes. On four different occasions they've scored six months of free data on a phone; When the six months ends, they'll call and ask for an extension. "We aren't trying to pull wool over their eyes. It's pretty surprising what you can get if you're honest that you're just trying to make ends meet," says Johnny.

Food, $500: This is probably one of the hardest expenses to stick to in New York City, says Joanna, 28, a freelance copy editor who also does some writing and photography. As an Alabama native, she's keenly aware of how much more expensive it is to eat in the city. In fact, since they moved from Utah, they're eating at home a lot more than they used to since restaurants are so pricey. Of their $500 budget, at least $325 goes toward groceries.

Meals are planned in advance and grocery shopping is done with a list in hand. "I'm never just buying groceries for the sake of that looks good right now, or I might use that at some point," says Joanna, who has also learned that she tends to spend more money if she buys a little here and there.

Instead, every week and a half she sits down and orders from grocery delivery services, which is the cheaper option in NYC, believe it or not. Non-perishables are ordered from Google Express; Produce, dairy and such are from Amazon Fresh. Odds and ends are picked up around town. For instance, they discovered that one grocery store called Garden of Eden sells cheaper milk than anywhere else, so they'll go there to buy that and only that. There's another place they get their fruit.

Non-discretionary, $296: These are the expenses they have little choice but to pay. For instance, $150 covers subway fare. The rest goes toward insurance (life and supplemental health insurance). The family's main health coverage comes from Johnny's employer.

Personal & Clothing, $120: This pans out to $60 each per month. "We've always made a point to give ourselves personal spending money," says Johnny. "That way I don't care if Joanna rolls her eyes if I bring home a Lego set. That's a gift to myself for staying on budget."

The amount rolls over if it's not spent -- Right now Johnny has $293 and Joanna has $276. "We're both sitting on a surplus of money, we should probably spend it," they say with a laugh.

Everything else, $305: This is the catch-all category -- pet supplies, baby supplies, dry cleaning, home/personal care, entertainment, medical. When they first started, all these little things had their own category and allotted monthly amount. It wasn't long before they realized it was driving them nuts. "We realized if we keep doing it this way, we're never going to keep up with a budget," says Johnny.

So by creating a category for "everything else," they're better able to ride out life's unpredictable moments. You never know when you're going to run out of diapers or pet food, or have a minor medical expense. If there's extra at the end of the month, that goes toward extras they've been eyeing, like a new lamp for the apartment or outfit for daughter Sally or newborn Wynn.

Gifts, $145: At the beginning of the year, they sit down and plot out birthdays, anniversaries and holidays. They decide who's on the nice list and is getting gifts, plus how much they are going to spend. The total amount is divided by 12, which comes out to $145 per month. Some months will be light on the gift-giving, while others won't be. In June, for instance, Johnny and Joanna both have birthdays, plus Father’s Day and their wedding anniversary.

Vacation, $200: This year they budgeted just $2,400 for vacation, or $200 a month, since they figured their mobility would be pretty limited with their newborn, Wynn. When they're not just planning on a few weekend road trips, they allot more cash for vacation.

Grand total: $1,911

The couple also spends an undisclosed amount on rent (twice what they paid in Utah is all they'll say), gives 10% of their income to their church and socks away at least 25% into savings.

While salaries will hopefully continue trending upward, they try to keep their budget relatively static while ramping up their savings. It helps to look back on budgets from previous years and know they've lived happily on a certain amount before.

Meanwhile, they've slayed their debt monster, as they put it.

Johnny and Joanna are in the camp that thinks you should attack the loan with the least amount outstanding and totally disregard the interest rates. This is known as the "debt snowball" method; Alternatively, by the "debt avalanche" method, you'd attack the loan with the highest interest rate first.

"It's supposed to be the more psychologically motivating way to pay off debt and it totally was for us," says Joanna.

In less than two years they paid off 100% of their debt. All the while, they continued to save what they could. One reason was in case of an emergency. "We're especially conscious about knowing what can go wrong, will go wrong," says Johnny. They knew personal finance guru Dave Ramsey suggested a $1,000 emergency fund, but that made them feel vulnerable and they wanted a bigger safety net, for peace of mind if nothing else. They figured if and when they had an unexpected expense (like that root canal Johnny needed), not having a sufficient emergency fund would throw off their rigorous debt repayment plan.

They also started saving for retirement by contributing enough to their 401(k)s to get the employer match. The logic: When you're in your 20s, time is on your side. So take the free money and let the compound interest work its magic, even if it means having a few extra months of paying off loans.

Now they're saving for their daughters' college education in 529 plans, trying to max out their Roth IRA retirement funds and also socking away money for the house they want to buy someday.

Budgeting isn't always a favorite pastime. But it has become a sort of second nature that they've come to realize gives them more financial freedom in deciding how to spend their money, not less.

At the end of the day: "All our budget is is a list of priorities with dollar signs next to them," says Johnny.